7 Issues That Sabotage Startups From Raising Venture Capital
I’ve seen a pitch or two in my day. In fact this weekend I saw five startup entrepreneurs pitching to raise capital and in those five pitches, I witnessed seven common pitching mistakes. I’d seen these mistakes many times before. One lady made all seven of these errors in one pitch and this was the third time that I’ve seen her pitch in the last three years… So without further ado, I present a list of common mistakes entrepreneurs make when pitching for capital.
- Not Understanding You’re Part of a Portfolio – As a CEO, your company is your singular focus. To an investor, you and your company are a bus. If you don’t get funded it’s devastating….. to you. If the funder doesn’t fund you, even if you turn out to be a Facebook or a Google… it’s just a great story over drinks about the one that got away. For the best investors, only one in five investments makes money. In an investors mind, you are pitching an opportunity to lose money. Smart investors invest in portfolios so the one company that turns out to be a rocket ship makes up for the other loses. You’re just a bus…. if an investor misses you… another bus will be by in 15 minutes.
- Pitching The Wrong Audience – If you spend the majority of your time pitching your product like you were selling it to a customer, you’re selling to the wrong audience. All of us humans are tuned to one popular radio station WIIFM or What’s In It For Me, and your number one priority as a pitcher is to convince them that you can make them money. If you aren’t pitching a pill that will make every person fit, good looking and live forever, you’re just selling a silly widget. Investors don’t invest in widgets. Job one is to convince an investor there is a market pain, and that you can profitably be the antidote for that pain and that there are enough potential customers with that pain that will reach into their wallets to build a high-value company.
- Trying To Serve The Entire Apple – When you’re pitching, you only have a limited amount of time. If you’re good, you’re going to get another bite at the apple so don’t serve up the entire apple in that first pitch. Give the investor enough of a taste so they ask for more. Earn that second bite. You’re pitching for a date and not a marriage.
- Demonstrating Marketing & Sales Naivety – Not understand who you’re pitching too, what their needs are, how to tell your story in a compelling manner and not keeping the investors’ interest is a storytelling failure. If you can’t sell your story to the investor, how is an investor to believe you can sell your product to customers?
- Confusing Your Company With Your Baby – All babies are beautiful yet all companies are not. Don’t act like the investor just told you, you have an ugly baby when they point out they perceive your company has a wart.
- Seeming Uncoachable – Getting defensive, not listening, and reacting badly to input. It’s okay to argue with the investor but remember you want their money and they are looking for an excuse not to lose their money in your company. If you want their money, listen to them, let them know you’re coachable. Don’t look like some dogmatic ideologue who knows all the answers.
- Anger Management – It seems simple but don’t lose your temper. Even if you don’t want the money from the investor that is tormenting you. Your loss of composure will make a good story (or blog) that will follow you as you try and raise from other investors.